The Russian-Ukrainian Military Conflict Is Not Over Yet, Members Of Parliament Remind The Government To Be Aware Of The Impact On The National Economy

Ukraine's ruin (Photo via @verkhovna_rada)

JAKARTA - Negotiations to resolve the military conflict between Russia and Ukraine have not yielded any results. Member of Commission XI DPR RI Heri Gunawan assessed that a prolonged war would have an impact on the global economy, including the national economy.

According to him, this condition must be anticipated by the government, such as the spike in world oil prices and the potential weakening of Indonesia's export-import performance.

“Currently, people are still struggling due to the surge in the price of cooking oil, soybeans and beef. If it is added to the increase in the price of wheat and its derivative products, it will increase the burden on the people," said Hergun, Heri's nickname in his statement, Sunday, March 6.

Hergun said, Ukraine is one of the second largest wheat supplying countries for Indonesia. This war will hamper the supply of wheat, thereby increasing the price of wheat and its derivative products. In 2021, the total value of Indonesian wheat imports will reach US$3.54 billion.

"The largest imports from Australia reached 41.58 percent or 1.47 billion US dollars, followed by Ukraine at 25.91 percent or 919.43 million US dollars," he said.

The government, he continued, must prepare mitigation measures to deal with the shortage of wheat. As the economy recovers, it will certainly require more wheat supplies. The government needs to explore other countries as a substitute for Ukraine as a wheat supplier.

"Although it is estimated that it will be difficult to get substitutes for wheat-producing countries, the government must try optimally," he said.

He explained that in 2021/2022, Indonesia was the world's 14th consumer of wheat with 10.4 million tons. China is in first place with 148.5 million tons. Followed by the European Union with 107.65 million tons, India with 104.25 million tons, Russia with 41.5 million tons, and the United States with 30.97 million tons. The food and beverage industry in Indonesia is in dire need of imported wheat for raw materials. If the war goes on for a long time and there is no substitute for Ukrainian wheat, then production will inevitably be disrupted.

“If production declines, it could result in a reduction in employees, whether their working hours are reduced, furloughed, or laid off. This can increase unemployment and poverty rates in 2022. In fact, in 2021, the unemployment rate has fallen from 7.07 percent in August 2020 to 6.49 percent in August 2021. And the poverty rate has also decreased from 10.19 percent in September 2020. to 9.71 percent in September 2021," he explained.

Furthermore, he added, another impact that needs to be watched out for is the increase in world oil prices which have risen to 107.47 US dollars per barrel for the price of Brent crude oil futures for the May 2022 contract.

Meanwhile, the price of West Texas Intermediate (WTI) oil rose to US$106.23 per barrel. Prior to the Russo-Ukrainian war, the energy market was already volatile. This is because the world's oil supply was unable to keep up with the strong economic recovery when the Covid-19 pandemic began to slow down.

"The increase in world oil on the one hand benefits the state budget because it gets a surge in state revenues. But on the other hand it is difficult for the people because they have to accept the increase in fuel prices," he said.

Previously, on February 12, Pertamina had raised the prices of 3 types of non-subsidized fuel, namely Pertamina Turbo, Pertamina Dex, and Dexlite. The price increase ranged from IDR 1,500 to IDR 2,650 from the previous price. If world oil prices continue to soar, it is not impossible that Pertamina will also raise fuel prices again.

“The increase in fuel prices will certainly push up prices. Indonesia will experience quite strong pressure. The increase in oil prices will lead to two choices of increasing energy subsidies or increasing fuel and electricity prices. Both are difficult choices, because they will have an impact on the state budget and people's purchasing power," concluded Hergun.